Prepare for the future with education investing.
Learn about the education investing options available to you, and let us help you start investing for college today.
When you think higher education, you probably think cost. No surprise. It is expensive. And a variety of factors can impact these costs. Besides tuition and fees, students may have to pay for housing, food, transportation, books, supplies and other related expenses.
No matter when your child starts his or her higher education journey, you can begin the planning process now. By using our Saving for College Calculator, you can estimate the amounts needed to start college in one year, six years or even 18 years based on public in-state, public out-of-state and private college tuitions.
Investing for education
The foundation for a strong future begins with higher education. Today, there are more education funding options than ever before. Plus, when you begin investing early, you put time on your side as you build an education fund.
Careful research and planning can position you to be prepared when your student starts college. However, knowing which option to choose requires an understanding of the features, benefits and tax implications of each.
Education investing options
Talk to us to become more acquainted with the options below and determine which one may be right for your family.
A 529 plan is one way to invest for education. It offers you control as the account owner and flexibility in your investment choices. 529 plans are available in nearly every state and are designed so that any U.S. citizen or resident can open an account and invest for college expenses and those associated with public, private or religious K-12 education.
Begin investing when a child is young so funds have the potential to grow over time, tax deferred, until you're ready to make qualified tax-free withdrawals.
- There are no income or age limitations.
- States sponsoring 529 plans may offer their own tax benefits on contributions, including income tax deductions.
- Earnings withdrawn that are not used for qualifying college expenses are subject to a 10% federal penalty.
A Coverdell Education Savings Account allows you to make an annual nondeductible contribution to a specially designated investment trust account. The account grows federal income tax free and qualified withdrawals are tax free. Coverdell funds can be used for college expenses as well as K-12 expenses.
- Adjusted Gross Income (AGI) limitations apply, and no contributions are allowed after the beneficiary's 18th birthday.
- Beneficiary must use the funds within 30 days after their 30th birthday unless rolled over to a new beneficiary, except in the case of a special-needs beneficiary.
- Earnings withdrawn from a CESA that are not used for qualifying educational expenses are subject to a 10% federal penalty.
You can save for higher education expenses as the custodian of an account opened in a minor’s name. An UGMA/UTMA allows you to make an irrevocable gift of money to a child. While the assets belong to the minor, you control them until the child reaches legal age in your state.
- There are no income limitations or annual contribution limits.
- Earnings are taxable at the child's rate up to a certain threshold, then taxed at rates for estates and trusts. Withdrawals of contributions are not subject to income tax.
- Once established, the account beneficiaries and owner cannot be changed and the account transfers to the child when they reach legal age.
An ABLE Account is a tax-advantaged savings account for individuals with disabilities. Contributions are not tax deductible for purposes of federal taxes but may be deductible for state income tax purposes. Income earned in the account is not taxed when used for qualified disability expenses. In addition to education expenses, these expenses include housing, transportation, employment training, assistive technology, personal support services, healthcare expenses, etc.
- Eligible to individuals with significant disabilities of any age with an age of onset of disability before the individual’s 26th birthday.
- Total contributions to the account are limited to the annual gift tax exclusion.
- SSI benefits may be affected if the account size exceeds certain thresholds.
- The account should not affect Medicaid benefits, but may be subject to Medicaid Pay-Back provisions upon the owner’s death.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.